My recommended reading list on successful companies; He Built a Trillion-Dollar Company. He Wouldn't Do It Again; How Inflation Can Keep Falling; More macroeconomic data; The Daily Show segment on reverse mortgages
1) There are dozens of things that are required to be a successful investor – including the ability to understand businesses and financial statements, value a company, control one's emotions, manage a portfolio effectively, etc.
But if I had to name one that's more important than anything else, it's the ability to identify great businesses – ideally early on, before everyone else does so and they are valued at hundreds of billions of dollars.
And what better way to develop this skill than to study the greatest businesses of all time?
That's why I've read dozens of books by and about the most successful businesses and entrepreneurs in history. As I scan my bookshelf, a number of them jump out at me (some of them date back more than 20 years!)... So, if you have some extra time around the holidays this year, I suggest reading one (or more!) of these:
- The Snowball: Warren Buffett and the Business of Life (also Buffett: The Making of an American Capitalist)
- Poor Charlie's Almanack: The Essential Wit and Wisdom of Charles T. Munger
- Elon Musk (also Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future and Liftoff: Elon Musk and the Desperate Early Days That Launched SpaceX)
- The Everything Store: Jeff Bezos and the Age of Amazon (also Amazon Unbound: Jeff Bezos and the Invention of a Global Empire)
- Facebook: The Inside Story (also Zucked: Waking Up to the Facebook Catastrophe)
- No Rules Rules: Netflix and the Culture of Reinvention
With this in mind, while it's not a book, I recommend that you read this recent Wall Street Journal profile of Jensen Huang, who co-founded chipmaker Nvidia (NVDA) 30 years ago and remains its CEO: He Built a Trillion-Dollar Company. He Wouldn't Do It Again.
With an incredible year-to-date gain of more than 225%, the stock has been a blowout performer in the S&P 500 Index – propelling it into the rare handful of companies that have reached a $1 trillion market cap. (The stock is up an even more staggering 660% since I pounded the table on it on February 5, 2020 back at Empire Financial Research.)
Interestingly, Huang says he wouldn't do it again... Here's an excerpt from the WSJ article:
When he sat down in a booth at his local Denny's and began plotting out the business that would change his life, Jensen Huang didn't know that his startup would one day be worth $1 trillion. In fact, the only chief executive in Nvidia's history didn't know much of anything about what he was getting himself into.
But if he had known three decades ago what he knows today, he never would have founded one of the world's most valuable companies.
"The reason for that is really quite simple," Huang said recently. "Building Nvidia turned out to have been a million times harder than I expected."
Nvidia was the stock market's big winner of 2023, when the chip maker cracked $1 trillion in value. That would have seemed impossible 30 years ago, and it wasn't especially probable just one year ago, before the AI boom made Nvidia worth more than Netflix, Nike and Novo Nordisk combined.
So why wouldn't he do it again?
"If we realized the pain and suffering and how vulnerable you're going to feel, the challenges that you're going to endure, the embarrassment and the shame and the list of all the things that go wrong," he said, "nobody in their right mind would do it."
The candor from one of tech's longest-tenured CEOs wasn't just eye-opening. Huang's comments were also a rare peek into the mind of one of the most successful entrepreneurs of his generation, someone who took an idea hatched over Grand Slam breakfasts and Super Bird turkey sandwiches and turned it into a trillion-dollar company. Along the way he learned an important, counterintuitive lesson.
Everyone in Silicon Valley knows they have to be resilient. Huang knows it also helps to be ignorant.
"I think that's kind of the superpower of an entrepreneur," he said. "They don't know how hard it is. And they only ask themselves: How hard can it be? To this day, I trick my brain into thinking: How hard can it be?"
Really hard, as it turns out. He didn't know that the original business plan had no chance of success. He didn't know how many times he would fail. And he didn't know just how much he didn't know. But just because the 60-year-old billionaire says he wouldn't do it again doesn't mean he's telling other people they shouldn't. In fact, the opposite: Only they have the advantage of being undaunted by the difficulty of building a company.
2) Here's a quick follow-up on yesterday's comments about inflation...
A "Heard on the Street" column in today's Wall Street Journal highlights some of the factors that could lead to inflation falling even further next year – most notably rent costs, which are a lagging indicator. That said, I continue to believe what I've been saying all year: that inflation will stay in the 3% to 4% range for the foreseeable future. Here's the column: How Inflation Can Keep Falling. Excerpt:
Rent prices, which the Labor Department uses not just to measure what renters are paying, but to construct housing-cost measures for homeowners, rose 0.5% from October, and were up 6.9% from a year earlier. But because the Labor Department's rent measure reflects not just rents on newly signed leases, but existing rents, this is a lagging indicator.
A new measure from the Labor Department – the new tenant rent index – which measures what new renters would pay, was up 2.7% in the third quarter from a year earlier. The new index, which tends to lead the gauge used in the inflation report by about a year, started to cool markedly in the fourth quarter of 2022.
3) Here's CNBC's Carl Quintanilla with two more pieces of good macro news to add to what I included in yesterday's e-mail:
And:
4) And here's The Daily Show with a funny but also insightful segment about reverse mortgages, which are indeed often scams: Are Reverse Mortgages a Scam?
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.